Hi there,
I can't speak for Dan - but for myself - option 2. I prefer to be fully invested at all times and prefer to keep my cash to a minimum. Research has shown that time in the market outperforms time out of the market. Waiting for a correction can also lead to missing out on big gains. For example, folks were calling for a correction for years until it finally came during the covid crash - but even with the covid crash, the markets were still much higher than years before.
I also read research that said most of the gains in the markets occur in around 7-10 days - if you miss out holding on those 10 days, you underperform. That is why it is near impossible to time the market. If you are sitting in cash and miss out on one of those days, you are likely to underperform.
In my opinion, there is always something to buy that is of good value in any market. Also, since i buy stocks for the long-term, i don't sell in a correction. New money will be used to average down (or up) depending on the situation. During the covid crash, i didn't sell a single stock and just continued topping up positions i thought provided excellent value.
I know others may disagree, but I tend to go with the facts and not even the best and most seasoned investors have been able to time market corrections consistently.
Mat